Predictable Risk and Returns in Emerging Markets

Abstract

equity markets significantly reduces the unconditional portfolio risk of a world investor.However, standard global asset pricing models, which assume complete integration of capital markets, fail to explain the cross-section of average returns in emerging countries. An analysis of the predictability of the returns reveals that emerging market returns are more likely than developed countries to be influenced by local information.

Chinese IPO activity, pricing, and market cycles

“…International investors can use Chinese IPOs as other alternatives to improve portfolio performance. As Harvey (1995) suggests that the inclusion of international equities in domestic portfolios actually reduces portfolio's total risk. Thus, Chinese IPOs provide an additional investment opportunity that international investors can choose to enhance their portfolio returns and/or to reduce their portfolio risks.…”

Underpricing and long-run performance of Chinese IPOs: the role of underwriter reputation

“…Compared with developed markets, emerging markets exhibit more severe information asymmetry and lower levels of informational efficiency (see, e.g., Domowitz et al 1997;Chan et al 2008). As a result, it takes longer for any information to be fully reflected in asset prices, which can cause the relationship between underwriter reputation and IPO performance in emerging markets to be different from that observed in developed markets (Harvey 1995).…”

The impact of exchange rate risk on international asset pricing under various market structures

“…Previous empirical literature (including Dumas and Solnik 1995;De Santis and Gerard 1998;Ferson and Harvey 1993;Harvey 1995;Carrieri et al 2006;Chaieb and Errunza 2007), either have used randomly selected currencies or some kind of currency indices to test the impact of exchange rate risk. Most of the studies used trade-weighted currency indices of some industrialized countries.…”